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James Hyerczyk
AUDUSD

Weekly Analysis and Recommendation:  Technical and fundamental factors helped drive the AUD/USD higher last week. Oversold technical factors and a potentially bullish chart pattern contributed to the rally.

A stumbling Australian economy had most traders convinced the bottom was about to fall out of the market. However, the price action the past two weeks and comments from the Reserve Bank suggest that some investors are starting to think the recent surge in short selling may have gone too far.

According to the U.S. Commodity Futures Trading Commission’s official U.S. futures market data, asset managers and hedge funds last week held the biggest number of net short positions on the Australian Dollar since August 2013, a total of 85,614 positions.

The gloomy outlook for the economy was due to the end of a decade long mining-investment boom. Falling commodity prices and the slowing economy in China, Australia’s biggest trading partner, were also to blame for the rapid descent of the Aussie Dollar.

Despite the bearish outlook, the AUD/USD rebounded quickly on Tuesday, August 4 after short-sellers were caught off guard when the Reserve Bank of Australia refrained from a rate hike and offered guidance suggesting that it seemed satisfied with the current price level of the currency.

Friday’s U.S. Non-Farm Payrolls report failed to put an end to the short-covering. The 215,000 jobs added to the economy in July were below the consensus but within the range of estimates. Although most investors remain certain a Fed rate hike will eventually put a cap on the rally, until there is clarity about the timing of the first rate hike since 2006, the Australian Dollar may appreciate against the U.S. Dollar over the near-term.

After the jobs report, speculators increased bets for a September rate hike from 47% to 55%. They are, however, 100% certain that a rate hike will take place by December. Given the huge number of shorts in the market and the uncertainty over the timing of the rate hike, the current position-squaring rally could continue until there is more evidence supporting an early rate hike. This evidence includes this week’s retail sales report and the consumer inflation report later in the month.

Monday could be a volatile session because FOMC Members Fischer and Lockhart are scheduled to speak. They are likely to give their opinion on the timing of the rate hike and this could trigger a strong reaction by investors.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports. 

Weekly AUD/USD

Important Reports to Watch this Week

         Date                  Time           Curr                                Event                                                                       Forecast Previous                                

Mon Aug 10

 7:15am ET

USD

 

FOMC Member Fischer Speaks

         
 

9:00am ET

USD

 

FOMC Member Lockhart Speaks

         
 

12:25pm ET

USD

 

FOMC Member Lockhart Speaks

         
 

9:30pm ET

AUD

 

NAB Business Confidence

     

10

 

Tue Aug 11

8:30am ET

USD

 

Prelim Nonfarm Productivity q/q

   

1.6%

-3.1%

 
   

USD

 

Prelim Unit Labor Costs q/q

   

-0.1%

6.7%

 
 

11th-13th

USD

 

Mortgage Delinquencies

     

5.54%

 
 

8:30pm ET

AUD

 

Westpac Consumer Sentiment

     

-3.2%

 
 

9:30pm ET

AUD

 

Wage Price Index q/q

   

0.6%

0.5%

 

Wed Aug 12

6:00am ET

AUD

 

RBA Deputy Gov Lowe Speaks

         
 

10:00am ET

USD

 

JOLTS Job Openings

   

5.42M

5.36M

 
 

10:30am ET

USD

 

Crude Oil Inventories

     

-4.4M

 
 

9:00pm ET

AUD

 

MI Inflation Expectations

     

3.4%

 
 

10:15pm ET

AUD

 

RBA Assist Gov Kent Speaks

         

Thu Aug 13

8:30am ET

USD

 

Core Retail Sales m/m

   

0.5%

-0.1%

 
   

USD

 

Retail Sales m/m

   

0.5%

-0.3%

 
   

USD

 

Unemployment Claims

   

272K

270K

 
   

USD

 

Import Prices m/m

   

-1.0%

-0.1%

 

Fri Aug 14

8:30am ET

USD

 

PPI m/m

   

0.1%

0.4%

 
   

USD

 

Core PPI m/m

   

0.1%

0.3%

 
 

9:15am ET

USD

 

Capacity Utilization Rate

   

78.0%

78.4%

 
   

USD

 

Industrial Production m/m

   

0.3%

0.3%

 
 

10:00am ET

USD

 

Prelim University of Michigan Consumer Sentiment

   

93.5

93.1

 
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